GEICO, Wells Fargo among dozens of companies testing virtual clerks

First it was the tellers. Now, call centers are under threat as financial services firms weigh new voice-activation technology to cut the cost of customer service.

USAA, GEICO Corp. and other financial firms are turning smartphones into virtual clerks. USAA in February became the first to let depositors use its mobile application via spoken commands. Now, Wells Fargo, U.S. Bancorp and ING Groep also are among about 50 firms working with Nuance Communications Inc. to use similar technology in mobile apps.

While banks have offered basic services over the phone for years, new programs seek to provide more complex interaction, similar to Apple’s Siri talking digital assistant, also powered by Nuance’s voice and artificial-intelligence software. Customers will eventually be able to ask, “Has my check cleared?” or “Am I on track to save for retirement?” using apps, instead of visiting a branch or dialing a call center.

The feature lessens the need for human interaction and could reduce the number of customer calls to banks by as much as 40 percent, said Richard Crone, chief executive officer of researcher Crone Consulting. By using voice-based apps to cut the number of call centers and workers to staff them, the financial-services industry could save $8 billion to $12 billion a year, he said.

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“There’s a business case around reducing call-center calls,” said Dominic Venturo, payments chief innovation officer at U.S. Bancorp, which tested voice banking with hundreds of its own employees earlier this year.

While apps vary from bank to bank, a user can typically activate the tool with a button and then start asking questions. The software bases its response on a quick review of such information as the customer’s account and banking history, providing answers with text or spoken word.

The overhaul of banking apps was prompted largely by Nuance’s release in August 2012 of Nina — a Siri-like virtual assistant designed for mobile apps. Using artificial intelligence and a dictionary of thousands of banking-related phrases, Nina can simplify finding answers to complex financial queries on the go, said Robert Weideman, an executive vice president at Burlington, Mass.-based Nuance.

“We are seeing something very similar to mobile-check deposit — all of a sudden, everyone is doing it,” Weideman said. Mobile deposits, which let customers snap photos of a check to submit it to their accounts, are used by 21 percent of Generation Y households — those born in the early 1980s to early 1990s — according to Raddon Financial Group.

The market for voice-recognition technologies will reach $113 billion in 2017, up from about $53 billion last year, BCC Research estimates. In two to three years, mobile will account for more than half of all industry customer-service interactions, up from less than 30 percent today, according to Crone. That’s happening as more consumers bank using their phones. Some 48 percent of smartphone owners had used mobile banking in the previous 12 months, up from 42 percent in December 2011, a 2012 Federal Reserve Board survey showed.

Nuance, whose stock is down by a third this year, could use the growth. Billionaire investor Carl Icahn has taken a 19.2 percent stake in the voice-technology company and has named two directors to the board.

Protecting consumers’ privacy and security will be key for increased adoption of mobile-banking apps, said Seth Schoen, a senior staff technologist at the Electronic Frontier Foundation. With smartphones functioning as small computers that store sensitive information, identity thieves are increasingly trying to steal users’ banking credentials, he said.

“When we are talking about banking, people are typically concerned about identity theft,” Schoen said. “There’s also a high-level concern that people’s phones could be infected with malware. This could be used to steal people’s banking credentials. They can use that to commit identity theft.” People should also be wary about the security of the networks themselves, he said.

To make real headway, the technology will need to get better: The system relies on always-on connectivity, which isn’t possible in areas with spotty wireless service. And many consumers may not feel comfortable talking to their phone in public.

“Am I likely to talk about my finances when I am in a group of strangers?” said Stessa Cohen, an analyst at Gartner Inc. “I think the answer is no. It might be like, you are watching TV, and you might use it. Or, if you are walking down the street, and you want to find the nearest ATM, you might use your voice.”

And, as Siri users complained at its introduction, the apps may not always understand verbal commands perfectly, such as from a person speaking with a strong accent or in a noisy environment.

“Voice is on the devices, but it still isn’t perfect,” U.S. Bancorp’s Venturo said.

Still, financial institutions are forging ahead, confident that customers won’t mind speaking to a virtual bank teller. USAA, which provides banking and insurance services to millions of military families, earlier this year rolled out an iPhone app that can look up users’ accounts and answer questions using voice commands.

“Before, I’d call USAA once a week or every two weeks to see that a check or a claim went through,” said USAA customer James Burge, of Colorado Springs, Colo. “Since the voice option’s been given, I don’t call them — really ever.”

Wells Fargo, U.S. Bancorp and ING have also run tests, and may enable voice recognition in their apps in coming months. In the next year, 20 percent of all mobile-banking customers will use voice commands in their apps every month, Weideman said. That’s up from less than 1 percent today, according to Crone Consulting.

The banks are betting the voice feature will reduce the number of simple questions their human representatives field. The apps can also help ease the process of filling out applications for customers. Instead of typing on a tiny phone screen to apply for credit cards, for example, users can speak to fill out forms. Consumers also could potentially use voice to sign up for new accounts and to make appointments, said Jim Smith, an executive vice president at Wells Fargo, which tested voice features with 3,000 employees earlier this year.

Intelligent voice apps could “increase retention and ultimately increase revenue,” said Neff Hudson, an assistant vice president at San Antonio, Texas-based USAA. The convenience may boost the number of times customers interact with their banks — virtually and in person — by 10 percent to 30 percent a year, Crone said. That could eventually translate into more business: A checking-account customer may think of the bank when applying for a mortgage, for instance.